scorecardresearch

NMDC’s Chhattisgarh steel plant to be operational in September

The steel ministry had asked NMDC to diversify and move up the value chain.

Steel Industry India
India’s crude steel capacity currently stands at around 150 mtpa. (Reuters)

State-run NMDC’s three million tonne per annum (mtpa) greenfield steel plant at Nagarnar in Chhattisgarh is likely to be commissioned towards the end of September, after a delay of nearly seven years. The state-run firm spent Rs 20,240 crore as of May this year for the plant and is likely to spend another Rs 1,700 crore as mostly commissioning-related milestone payment. The project has seen cost overrun of around Rs 7,000 crore.

The  steel ministry had asked NMDC to diversify and move up the value chain. The idea was also to hedge itself against the volatility in iron ore prices.

Initially, it was estimated that the greenfield plant would require around Rs 15,525-crore investment and would go on stream by March 2015. However, various issues, including naxalite agitation and delays in implementing various packages by the vendors, including BHEL, commercial disputes with the contractors, delays in land acquisition for the slurry pipeline and Covid-induced lockdowns among others, led to the delay in commissioning.

Locals’ protest erupted following Centre’s approval in October 2020 for the demerger of the unit from the parent NMDC and strategic disinvestment of the demerged entity by selling its entire stake in it to a strategic player. NMDC has convened a meeting of the equity shareholders and unsecured creditors on June 28 to approve the demerger scheme.

NMDC is likely to complete the demerger process by August-September. A source in the company said the government has been pushing NMDC very hard to complete the demerger process. Once the demerger process is completed, bids for the demerged entity would be called for.

A source in the company said, NMDC will draw from its approved Rs 4,400 crore credit line with State Bank of India (SBI) to fund the remaining amount needed for commissioning of the unit. Till May this year, NMDC has drawn Rs 1,144 crore from the approved credit line. The cost of running the commissioning the unit till the time it starts generating revenue will also be met from the credit line.

As FE reported earlier, Tata Steel and ArcelorMittal-Nippon Steel India (AM/NS India) may not bid for NMDC’s Nagarnar steel unit. Sajjan Jindal’s JSW Steel, Naveen Jindal’s Jindal Steel and Power and new entrants into the steel sector like Vedanta and Adani Group, are most likely to be in the fray to take over the greenfield unit.

Greenfield steel unit of the size of Nagarnar is rare. Barring JSPL’s greenfield unit with a six mtpa capacity at Angul in Odisha, commissioned in 2017, no major greenfield steel unit has come up in recent times. Meanwhile, steel firms have raised their capacities, but those are mostly through the brownfield route and debottlenecking of the existing facilities.

India’s crude steel capacity currently stands at around 150 mtpa. Under the National Steel Policy 2017, the government envisaged it to go up to 300 mtpa.

The Nagarnar steel plant has around 2,180 acres of land, including 1,940 acres on which the plant is located. The capacity of the unit can be scaled up by another 2-3 mtpa in the next phase without requiring additional land. Apart from hot-rolled coils and auto-grade steels, the unit will produce various grades for producing API pipes, used in modern infrastructure and products for manufacturing LPG cylinders.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Industry